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Investments

Moodys: Home sales and homebuilding will take off in 2015

Record-low inventories will drive homebuilding

Moody's Investors Services is bullish on housing and homebuilding for 2015, as they say the year will start with near-record low inventories of completed and unsold new homes, and low inventories of existing homes.

They’re specific: The sector’s revenues will grow by more than 10% year-over-year through 2015, and weighted industry gross margins will exceed 20%.

“We expect total housing starts in 2015 of 1 million – 1.2 million, up from 975,000 – 1 million for 2014, and new home sales will climb to about 500,000 – 525,000, up from about 450,000 for 2014,” analysts say. “Prices will increase at a more modest rate than in 2014, but affordability will remain strong by historical standards, enticing buyers.”

So what will get homebuyers off the sidelines? Real household income growth must resume, they say, to bring that pent-up contingent of  first-time homebuyers to the table.

Click to enlarge

(Source: Moodys Investor Services)

There could be headwinds, they caution.

“The tight supply of skilled labor and stringent mortgage underwriting, along with higher material costs and a limited number of finished building lots, could also constrain the industry's ongoing recovery,” Moody’s says.

The full report is available through Moodys.com, and was prepared by analysts Joseph Snider, Tiina Siilaberg and Karen Nickerson.

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